the tug of war continued…bob the bear and his feckless friends kept toying with the bulls but neither could grow enough hair on their backs to make a move. In the bulls defense they kept buying every dip. Pretty much every pullback to the 10dma was greeted with buying pressure. If you look at the chart and go back..its easy to see why so many believe that we will top out here. In june and August this type of consolidation was a prelude to a nasty fall. We also for the voodoo crowd got some divergences occuring including the RSI starting to fade even though we are still at the top of the move which indicates a slowing of momo. if u see in late august when we bottom we had a positive divergence as RSI started rounding up before we made our move. In the end a big break out of 1150 zone puts the end to any divergence talk as everything turns back up as soon as it happens. indicators tend to lag. On the positive side we are still seeing tons of strength into the breakouts. they arent failing instead they are running hard for days upon days and extending themselves then we are seeing a rotation into names that our lagging. This is my favorite type of trading as im a overtrader i move very fast take my cash and then move to a friend who hasnt felt anylove yet by the market. I expect that too continue as many skeptics have missed this move and a close above 1150 will lead many to chase the laggards and there are tons of bottom plays abound. The bottom booty bounce will be in full force next week.
things we noticed though is that
dips are getting bought
1150 is a bit tougher to crack than many thought it would be.
technical divergences are all around us.
Sentiment still favors bulls.
Just from twitter, news, blogs you are seeing sentiment and the chatter shift. First the reason for the rally was an oversold bounce, then it was a short squeeze, then it was POMO, now people are rationalizing the bounce via its election season. to me the constant rationalization of the move along with the rotation in the excuses is a bullish sign.
in the end the price action is the only thing that pays.
we either are going to
1. breakout above spx 1150 and setup for spx 1175
2. move sideways…we’ll keep tapping the old resistance 1131 and the 20dma till we just coil ourselves into some monster move.
3. we blow up…1st we break below spx 1131 (prior big resistance) then tap the 20dma (spx 1126) if that cant hold us then the 200dma becomes the ultimate test (spx 1117) The 200dma is the bottom of the range or the bottom of the box we are in. the box is spx 1151-1117. Either we break above it and start a new one. Or we break below it and go back to our old trading range.
Key levels to watch
SPX 1150 (resistance)
SPX 1131 (the breakout spot now support)
SPX 1126 (20dma)
SPX 1117 (200dma)
keep an eye on the emerging markets. If we break below support..many many are long these. They have made ginormous moves and will be prove to be great shorts if the SPX gets taken out.
subs a more detailed video of the indexes will be available tonight.